There is no denying the fact that the decision of buying vs renting a house has been one of the persistent dilemmas faced by those looking to buy a house or rent one. While buying a house is a long but secure financial commitment, renting a house is unsecured but much easy on the budget. However, apparently, with home loan interest rates plummeting, many are convinced to take the long plunge and buy a house. Mentioned below is a detailed comparison of renting vs buying, to help you understand better.
Buying vs Renting: Investment Perspective
Undoubtedly, buying a house is one of the best investments to make as it helps you to acquire a big asset and secures your future to a large extent. Moreover, with real estate prices soaring high, your property could be of a much higher value than what you paid for, in just a few years. However, it is important to note that appreciation of real estate depends on several factors such as prevailing market condition, circle rates, location of the property, maintenance of the house, etc. On the other hand, if you plan to rent a house, the money saved on buying a house can easily be invested in other instruments like mutual funds, PPF account, etc. to build a significant corpus for future needs.
Buying vs Renting: Tax Benefits
Homeowners are entitled to an annual tax benefit of Rs. 1.5 lakh under Section 80C and Rs. 2 lakh under Section 24B. In case of a joint home loan, the co-applicant can also claim similar tax benefits on the interest component of the loan. However, these tax benefits are only available after completion and handover of the property. In contrast, for those living on rent, a portion of the rent is tax-deductible under Section 10 (13A) of the IT Act with respect to the HRA (house rent allowance) of salaried individuals. This benefit is also available to self-employed individuals or salaried individuals without a separate HRA component in their salary under a different section of the IT Act 1961. In case the annual rent paid exceeds Rs. 1 lakh, a copy of the home owner’s PAN card needs to be submitted for availing the tax benefit.
Buying vs Renting: Costs Involved
Buying a house requires enduring several big expenses, ranging from home loan down payments and EMIs to various other costs like loan processing fee, registration cost, valuation charges, and more. Contrary to this, if you rent a house, the cost involved is only the monthly rent. However, the important point to note in this case is that you should be able to afford your monthly rent for the whole life, even after retirement.
Renting vs Buying: Key Benefits
|Buying a House
|Renting a House
|● Offers more stability as there is no dependence on the whims of the property owner
● Secured asset for the future of your family
● In most cases, the EMI amount does not vary much throughout the loan tenure
● Greater tax deduction benefits.
|● Easy to build a bigger corpus through savings and small investments
● A better option in case of urban locations with high property prices
● Ease of relocation for the purpose of job or any other reason
● In most cases, there is no maintenance cost involved.
The Final Word
From the above comparison, the choice of selection is completely subject to your budget and future preference. But if you are still confused, answer the following questions:
- Are you planning to change your city for work or any other purpose within the next 5 years?
- Have you used a home loan EMI calculator? Is the EMI amount affordable?
If you answered ‘No’ to the first question and ‘Yes’ to the second, you are better poised to buy your own house. If you answered ‘Yes’ to the first question and ‘No’ to the second one, then you should stick with renting a house for the time.